Life insurance claim DENIED or DELAYED?
Never abandon a policy or assume that the claim is denied, even if the insurance company has denied the claim.
Life Insurance Polices are Contracts
In very basic terms, life insurance policies are contracts wherein a (usually) company agrees to pay someone or another company an agreed amount of money upon the death of a specific person. Thousands of legitimate life insurance claims are denied every year. Typically (and most of the time) life insurers pay as agreed on their policies. Yet, there are thousands of claims that are disputed or denied, every year in the U.S.
The amount of benefit money withheld from those it is due to, each year, is several hundred million dollars, and has continued to climb, year over year.
To bring a successful life insurance denial claim, you will need to prove there was a contract in place.“The elements of a breach-of-contract claim under Alabama law are (1) a valid contract binding the parties; (2) the plaintiffs’ performance under the contract; (3) the defendant’s nonperformance; and (4) resulting damages.” Eaton v. Unum Group, 2015 WL 5306185, *2 (N.D. Ala. Sept. 10, 2015) (memorandum opinion) (citing Shaffer v. Regions Fin. Corp., 29 So. 3d 872, 880 (Ala. 2009) (quoting Reynolds Metals Co. v. Hill, 825 So. 2d 100, 105 (Ala. 2002)). Furthermore, “[t]he Supreme Court of Alabama has made clear that ‘[a] party claiming to be a third party beneficiary must establish that the contracting parties intended, upon execution of the contract, to bestow a direct, as opposed to an incidental, benefit upon the third party.’” Mitchell v. Archer Daniel Midland Co., 2015 WL 4231075, *5 (N.D. Ala. July 13, 2015) (memorandum opinion) (emphasis in original) (citations omitted). Put another way, “for one to be able to avail himself of a promise in an agreement to which he is not a party, he must, at least, show that it was intended for his direct benefit, in either all or part of its contemplated performance.” Ala. Dept of Revenue v. Fed. Deposit Ins. Corp., 2012 WL 2716273, *3 (M.D. Ala. July 9, 2012) (memorandum opinion) (quoting 13 Williston on Contracts § 37:8 (4th ed.) (citing Robins Dry Dock & Repair Co. v. Flint, 275 U.S. 303 (1927)).
“Under Alabama law, ‘[n]o contract is formed without an offer, an acceptance, consideration, and mutual assent to terms essential to the contract. A contract implied in fact requires the same elements as an express contract.’” Jackson v. LSI Indus., Inc., 2005 WL 1383180, *3 (M.D. Ala. June 9, 2005) (memorandum opinion) (quoting Steiger v. Huntsville City Bd. of Educ., 653 So. 2d 975, 978 (Ala. 1995) (citations omitted)). “The only difference between express contracts and implied contracts is the method of expressing mutual assent.” Id. (quoting Berry v. Druid City Hosp., 333 So. 2d 796, 799 (Ala. 1976)). “To have an enforceable implied contract, the facts must show circumstances from which an agreement can be inferred.” Id.
And an implied contract cannot exist in the presence of a written contract. See Kennedy v. Polar- BEK & Baker Wildwood Partnership, et al., 682 So. 2d 443, 447 (1996) (“[t]his Court has recognized that where an express contract exists between two parties, the law generally will not recognize an implied contract regarding the same subject matter.”) (citations omitted); see also Hendrix, Mohr & Yardley, Inc. v. City of Daphne, 359 So. 2d 792, (1978) (“[t]o recover under an implied contract, however, where there is an express contract, it must be shown either that the express contract is performed as to all but payment for the services, or that the other party has breached the express contract and thus prevented its performance.”).
“Exclusion Clauses” Favor Insurance Companies
To some insurance companies the only goal is to bring in as much money as possible while trying to paying out as little as possible on claims.
Adding exclusion clauses into life insurance policies is a way insurance companies aim to reduce their exposure (or “risk”) of having to pay out large sums of money to policy holders and their beneficiaries. Examples of common exclusions is the “dangerous activity” clause, which may lead to a denial of a claim to those who engage in dangerous activities, such as race car driving or bungee jumping, unless those individuals choose to pay a higher rate to have that exclusion removed from their policy.
Smoking may not be deemed “dangerous” but may make you “high-risk” and might require a higher rate of premium to secure the policy. In other words, despite your risk being higher because you smoke, the company will insure you, if you pay them more money for the policy yet, if you drive a race car, your chance of death is so high, the company won’t agree to insure you.
There are many tactics an insurance company may use to insist the insured person misrepresented his medical condition and refuse to honor a claim for benefits, citing “material misrepresentation.” Some companies may challenge an accidental death, saying it was suicide by the insured. A suicide exclusion typically is removed after 2 years but not always.
The Contestable Period: What is it?
Life Insurance companies are not required to automatically approve claims. If an insured person dies within a specific period of time, usually two years following the issuance of a life insurance policy itself, the company may justify rejecting a filed claim for many reasons. The life insurance industry views 2 years as a reasonable amount of time for a condition to emerge that may cause a claim to be filed.
There are some consumer advocates and other sources who indicate that various insurers have made the contestable period into a “we gotcha” period, fully leveraging every flaw, error, misstatement or omission to reject a beneficiary’s claim to death benefits within this 2 year window. The insurance company may spend a very long time investigating the possibility that the information provided to it in was inaccurate, false, or deceptive/misleading before it will agree to pay a claim. It may be necessary to hire a law firm to assist you in this time, that is when to call us at 205-836-1224.
A life insurance company may notice a flaw, error, or misrepresentation at the time a policy is issued but chose not to clarify or correct it. They may do so knowing the insurance company could later refuse to honor the claim.
Life insurance exclusions can include these and more:
- Acts of war (participating in warlike activities)
- Aviation/Pilot/Flying (private aircraft crashes)
- Alcohol and drug use
- Contestable period
- Criminal convictions
- Dangerous activity
- Failing to Disclose important medical history events
- Illegal activity
- Material misrepresentation in an application
- Misstatements of facts
- Preexisting Medical Conditions
- Suicide by the Insured
Categories of Contestable Period Claim Denials
There are two basic categories under which a life insurance companies contest your claim.
If, during the application period, you fail to disclose information that the insurance company, that it has decided is important in assessing risk, the company can deny a beneficiary any death benefits. An omission is one of the primary reasons an insurance company denies a death benefit claim.
In essence, if you omitted something from your application that the insurance company thinks matters, your beneficiary’s claims can be rejected and denied. That’s right, the life insurance company might not have to pay the claim. This is true in Alabama, even if that omission is in no way connected with your cause of death.
Alabama’s courts have held that failing to disclose even non-critical information can give the company an “out” regarding payment of a claim. For instance, if you pass away in a car accident but failed to disclose to the company you had prostate cancer 10 years before, they may have good grounds to deny any claim in Alabama.
For example, perhaps you omitted that you had diabetes and you later die in a lake, from drowning, that had nothing to do with your diabetic condition. The insurance company may be able to cancel your policy, if that drowning occurred within two years of the issuance of the life insurance contract. Part of this is because the Life Insurance company could argue that, ‘had they known’ of the diabetes, they would not have issued the policy to begin with.
You should carefully read and disclose all information a company asks for. You may also need to “supplement” your policy and/or application with additional information, if you become aware of it or discover it later.
What is it?
A misrepresentation in an application for insurance is “a statement of something as a fact which is untrue and affects the risk undertaken by the insurer.” Methodist Med. Ctr. of 111. v. Am. Med. Sec., 38 F.3d 316, 319 (7th Cir. 1994) (citations omitted).
“Incomplete answers or a failure to disclose material information on an application for insurance may constitute a misrepresentation when the omission prevents the insurer from adequately assessing the risk involved.” Id. at 320 (citations omitted).
The issuing company, if at any time over the life of the insurance policy, were to discover you misrepresented facts or questions during the application, can cancel your coverage or deny a beneficiary’s life insurance claim.
A material misrepresentation exclusion is often cited as the reason an insurance company denied a claim for death benefits during the contestable period. Note that it is not just restricted to the first two years after you purchase your policy, especially in Alabama. If you fail to disclose anything asked about or requested, this failure to disclose could be viewed as misrepresentation or fraud. You should always disclose as much as is requested.
An insurer in Alabama may be able to void the life insurance policy if it has relied upon material misrepresentations. Clark v. Ala. Farm Bureau Mut. Cas. Ins. Co., 465 So. 2d 1135. Alabama life insurance law does NOT require there by an “intent to deceive” by the applicant for the policy to be voided. Even innocent mistakes can cause the policy to become voided. Nat’l Sav. Life Ins. Co. v. Dutton, 419 So. 2d 1357
Alabama law says that the life insurance company is entitled to rely on the statements and representations made in a life insurance application. See Alabama Code § 27-14-7
“(a) All statements and descriptions in any application for an insurance policy or annuity contract, or in negotiations therefor, by, or in behalf of, the insured or annuitant shall be deemed to be representations and not warranties. Misrepresentations, omissions, concealment of facts and incorrect statements shall not prevent a recovery under the policy or contract unless either:
(2) Material either to the acceptance of the risk or to the hazard assumed by the insurer; or
(3) The insurer in good faith would either not have issued the policy or contract, or would not have issued a policy or contract at the premium rate as applied for, or would not have issued a policy or contract in as large an amount or would not have provided coverage with respect to the hazard resulting in the loss if the true facts had been made known to the insurer as required either by the application for the policy or contract or otherwise.
(b) No plea of misrepresentation or fraud in connection with the issuance of a life insurance policy or annuity contract shall be filed unless accompanied by a payment into court of all premiums paid on the policy or contract.”
A good example of this is, if you represented that you don’t use illegal drugs and the insurance company found out that you do or have, the company could cancel your policy, even if you had not used illegal drugs for many years.
It is generally held that “[a]n insurance company has the right to expect a prospective insured to give truthful information on the application, and the insurance company normally has no duty to inquire further into whether an insured has told the truth on the application.” Amerson v. Gardner, 681 So. 2d 507, 573 (Ala. Ct. App. 1996) (citations omitted).
Life Insurers Benefit from Use Ambiguity
Different state laws limit some exclusions. Be sure to read the definition of terms in your policy. Do not assume a definition, your policy could define many terms differently than what you do. “Dangerous activities” is another very ambiguous term for most people. For one person’s “dangerous” acts certainly might not be considered dangerous to another person.
Over time, life insurers have found numerous ways to avoid paying death benefits to beneficiaries. Skilled insurance representatives are very aware of and how to look for loopholes. They also have teams of lawyers on standby to assist them. They have many resources and know that you may not have any knowledge or experience in this area of law.
Life insurance companies have seen many, many claims and cases of the past years, so they may be able to interpret exclusions to their advantage. For example, an insured person might accidentally wander onto another person’s land while hunting and may die there, for any number of covered causes. In that case, the insurance company could refuse to pay death benefits because the person was engaged in trespassing, an illegal act.
The Wright Law Firm Can Help You
My office has handled several life insurance policy claims, wherein the life insurance company denied the claim based on information in the application but later paid the claim. Never assume that a denial from the insurance company is a permanent denial. Some unscrupulous life and Casualty insurance companies will unreasonably deny life insurance claims as a matter of course to buy time.
If you believe your insurance claim has been wrongfully denied or that the life insurance company is simply unreasonably delaying your life insurance policy claim, call my office to get a free evaluation of your case.
In all life insurance policy recovery cases we accept, you do not owe an attorney fee unless we collect or reach a settlement for you!
Some firms charge outrageous fees for life insurance case work. Our fees are extremely reasonable and I will beat any other firm’s fee*. You pay absolutely nothing unless we make a recovery for you.
It is critical that you call a life insurance attorney as soon as possible because time is of the essence to obtain can to prevent the company from using policy value to pay policy premiums. Insurance policies in Alabama are simply contracts and Terry a six-year statute of limitations. The specific time when the statute of limitations begin to run can be difficult to determine but A good rule of thumb is to use the date of death of the insured person. In general, you should have 6 years from the date of death to file a claim against the policy, if the contract is under seal, the statute of limitations is 10 years. As you can see there is a significant amount of time to follow up and pursue any life insurance policy claims you may have. There is one caveat, if you are pursuing an action for bad faith, there is a two-year statue which is found in Ala. Code 6-2-38, these types of bad faith refusal to pay claims begin to run at the time of the breach. See Dumas v. S. Guar. Ins. Co., 408 So. 2d 86, 89.
It is also important to obtain and examine all of the documents used during the application process. While most agents and life insurance policy personnel follow the law and do as I should, some agents will change information to make the policy be approved by the underwriting company, while the policy holder is unaware. Sometimes this is done in an effort to boost sales and as long as no claims are filed the agent and Company are allowed to keep the premiums. Once a claim is filed the company May examine the file closer and then denied based on changes made by the agent to make the policy fit or be approved in underwriting. Underwriting is a process by which the life insurance policy company examines all of the data provided by the applicant and decides whether or not they will or will not insure life the person applying. It is a general presumption that life insurance applications are true and correct.
As you can see, if and agent were too change the application to reflect that someone is healthier than they are, the underwriting company May approve a policy for someone that they would not normally approve. When this is done, the applicant or policy owner rarely finds out until after a claim is filed, which is when the policy is needed the most.
Alabama Life Insurance Guaranty
Did you know that Even if the life insurance company that issues your life insurance policy in the state of Alabama goes out of business, your benefits are guaranteed? That’s right! All life insurance policies issued in Alabama are guaranteed by the Alabama Life and Disability Insurance Guaranty Association. More information is available at their website: allifega.org.
In the state of Alabama, state guarantees payment to you in the amount $100,000 individual for lost cash value or $300,000 per individual for loss benefits. These amounts are guaranteed even if the policyholder insured larger amounts or took out multiple life insurance policies in their lifetime.
As a beneficiary under a life insurance policy you do have certain rights in Alabama.
Alabama Code 6-10-8.
Rights of beneficiaries and assignees under life insurance policies:
“If a policy of insurance, whether heretofore or hereafter issued, is effected by any person on his or her own life or on another life in favor of a person other than himself or herself or, except in cases of transfer with intent to defraud creditors, if a policy of life insurance is assigned or in any way made payable to any such person, the lawful beneficiary or assignee thereof, other than the insured or the person so effecting such insurance, or his or her executors or administrators, shall be entitled to its proceeds and avails against the creditors and representatives of the insured and of the person effecting the same, whether or not the right to change the beneficiary is reserved or permitted and whether or not the policy is made payable to the person whose life is insured if the beneficiary or assignee shall predecease such person; provided, that subject to the statute of limitations, the amount of any premiums for said insurance paid with intent to defraud creditors, with interest thereon, shall inure to their benefit from the proceeds of the policy; but the company issuing the policy shall be discharged of all liability thereon by payment of its proceeds in accordance with its terms unless, before such payment, the company shall have written notice, by or in behalf of a creditor, of a claim to recover for transfer made or premiums paid with intent to defraud creditors, with specifications of the amount claimed. A husband or a wife, in his or her own name or in the name of a trustee, may insure the life of his or her spouse for the benefit of himself or herself, or for the benefit of himself or herself and any child or children of the marriage; or a husband or a wife may insure his or her own life for the benefit of his or her spouse, or for the benefit of his or her spouse and children, or for the benefit of their children, either in the names of such children or in the name of a trustee; and such insurance and the proceeds and avails thereof, whether or not the right to change the beneficiary is reserved or permitted, is exempt from liability for the debts or engagements of the insured, or for the torts of the insured, or for any penalty or damages recoverable of the insured.”
Alabama now has a divorce revocation statute for non-probate assets, such as life insurance.
The Alabama legislature enacted Act No. 2015-312, codified at § 30-4-17, Ala. Code 1975, which provides for the revocation of certain transferable interests in property in the event of a divorce or an annulment. Unless the divorce decree or settlement agreement provides otherwise, a beneficiary designation in favor of a former spouse is revoked upon divorce or annulment. This does not apply to beneficiary designations that are irrevocable or to insurance policies on which the former spouse is listed as the owner or pays the premiums following the divorce or annulment
§ 30-4-17 (b):
(b) Except as provided by the express terms of a governing instrument, a court order, or a contract relating to the division of the martial estate made between the divorced individuals before or after the marriage, divorce, or annulment, the divorce or annulment of a marriage:
(1) revokes any revocable:
a. disposition or appointment of property made by a divorced individual to his or her former spouse in a governing instrument and any disposition or appointment created by law or in a governing instrument to a relative of the divorced individual’s former spouse;
b. provision in a governing instrument conferring a general or nongeneral power of appointment on the divorced individual’s former spouse or on a relative of the divorced individual’s former spouse; and
c. nomination in a governing instrument, nominating a divorced individual’s former spouse or a relative of the divorced individual’s former spouse to serve in any fiduciary or representative capacity, including a personal representative, executor, trustee, conservator, agent, or guardian; and
(2) severs the interests of the former spouses in property held by them at the time of the divorce or annulment as joint tenants with the right of survivorship transforming the interests of the former spouses into equal tenancies in common.
(c) A severance under subdivision (2) of subsection (b) does not affect any third-party interest in property acquired for value and in good faith reliance on an apparent title by survivorship in the survivor of the former spouses unless a writing declaring the severance has been noted, registered, filed, or recorded in records appropriate to the kind and location of the property which are relied upon, in the ordinary course of transactions involving such property, as evidence of ownership.
(d) Provisions of a governing instrument are given effect as if the former spouse and relatives of the former spouse disclaimed all provisions revoked by this section or, in the case of a revoked nomination in a fiduciary or representative capacity, as if the former spouse and relatives of the former spouse died immediately before the divorce or annulment.
(e) Provisions revoked solely by this section are revived by the divorced individual’s remarriage to the former spouse or by a nullification of the divorce or annulment.
(f) A payor or other third party is not liable for having made a payment or transferred an item of property or any other benefit to a beneficiary designated in a governing instrument affected by a divorce, annulment, or remarriage, or for having taken any other action in good faith reliance on the validity of the governing instrument, before the payor or other third party received written notice of the divorce, annulment, or remarriage. A payor or other third party is liable for a payment made or other action taken after the payor or other third party received written notice of a claimed forfeiture under this section.
(1) A person who purchases property from a former spouse, relative of a former spouse, or any other person for value and without notice, or who receives from a former spouse, relative of a former spouse, or any other person a payment or other item of property in partial or full satisfaction of a legally enforceable obligation, is neither obligated under this section to return the payment, item of property, or benefit nor is liable under this section for the amount of the payment or the value of the item of property or benefit.
(2) A former spouse, relative of a former spouse, or other person who receives a payment, an item of property, or any other benefit to which that person is not entitled under this section is obligated to return the payment, item of property, or benefit, or is personally liable for the amount of the payment or the value of the item of property or benefit, to the person who is entitled to the payment, benefit, or property under this section.
(3) If this section or any part of this section is preempted by federal law with respect to a payment, an item of property, or any other benefit covered by this section, a former spouse, relative of the former spouse, or any other person who receives a payment, an item of property, or any other benefit to which that person is not entitled under this section is obligated to return that payment, item of property, or benefit, or is personally liable for the amount of the payment of the value of the item of property or benefit, to the person who would have been entitled to it were this section or part of this section not preempted.
(h) The provisions of this section shall not apply to any insurance policy for which the former spouse is named beneficiary, if the former spouse is listed as owner of the policy or makes premium payments on the policy following the divorce or annulment.
Alabama Code Title 27. Insurance § 27-14-3
(a) Insurable interest with reference to personal insurance is an interest based upon a reasonable expectation of pecuniary advantage through the continued life, health, or bodily safety of another person and consequent loss by reason of his or her death or disability or a substantial interest engendered by love and affection in the case of individuals closely related by blood or by law.
(b) An individual has an unlimited insurable interest in his or her own life, health, and bodily safety and may lawfully take out a policy of insurance on his or her own life, health, or bodily safety and have the same made payable to whomsoever he or she pleases, regardless of whether the beneficiary so designated has an insurable interest.
(c) A corporation, foreign or domestic, has an insurable interest in the life or physical or mental ability of any of its directors, officers, or employees, or the directors, officers, or employees of any of its subsidiaries or any other person whose death or physical or mental disability might cause financial loss to the corporation; or, pursuant to any contractual arrangement with any shareholder concerning the reacquisition of shares owned by the shareholder at the time of his or her death or disability, on the life or physical or mental ability of that shareholder for the purpose of carrying out the contractual arrangement; or pursuant to any contract obligating the corporation as part of compensation arrangements or pursuant to a contract obligating the corporation as guarantor or surety, on the life of the principal obligor. The trustee of a trust established by a corporation for the sole benefit of the corporation has the same insurable interest in the life or physical or mental ability of any person as does the corporation. The trustee of a trust established by a corporation providing life, health, disability, retirement, or similar benefits to employees of the corporation or its affiliates and acting in a fiduciary capacity with respect to the employees, retired employees, or their dependents or beneficiaries has an insurable interest in the lives of employees for whom the benefits are to be provided.
(d) After satisfaction of the requirements of Section 27-17A-32(d)(1) , the trustee of a trust established by a certificate holder which complies with the requirements of Chapter 17A has an insurable interest in the life of a preneed contract purchaser or a preneed contract beneficiary. It is the intention of the Legislature that the preceding sentence shall be retroactive and shall also apply to all policies, as defined in this chapter, issued prior to May 6, 2008. It is also the intention of the Legislature that the value of any life insurance policy purchased by a trust pursuant to Chapter 17A shall not exceed the lesser of twenty thousand dollars ($20,000) or 100 percent of the purchase price of the preneed contract regulated under Chapter 17A. Further, it is the intention of the Legislature that any life insurance policy purchased by a trust pursuant to Chapter 17A be used for the sole benefit of the preneed contract purchaser, the preneed contract beneficiary, or the funeral establishment or cemetery providing funeral services, burial services, or funeral merchandise for the preneed contract purchaser, and not for the benefit of another person who otherwise lacks an insurable interest under this section.
(e) Any provision of this section and chapter to the contrary notwithstanding, a charitable organization that meets the requirements of Section 501(c)(3) of the Internal Revenue Code of 1986 , as amended, may own or purchase life insurance on an individual who consents to the ownership of purchase of that insurance. The charitable organization shall be deemed to have a substantial interest in the individual insured and to have an insurable interest in the individual insured whether the charitable organization originally purchases the insurance or the insurance is later transferred to the charitable organization by the insured or another person. This subsection is intended to clarify and declare existing law.
(f) An insurable interest shall exist at the time the contract of personal insurance becomes effective, but this requirement need not exist at the time the loss occurs.
(g) Any personal insurance contract procured, or caused to be procured, upon another individual is void unless the benefits under the contract are payable to the individual insured, or his or her personal representative, or to a person having, at the time when the contract was made, an insurable interest in the individual insured. In the case of a void contract, the insurer shall not be liable on the contract but shall be liable to repay to the person, or persons, who have paid the premiums, all premium payments without interest.
Alabama Code Title 27. Insurance § 27-14-4
(a) No contract of insurance of property or of any interest in property, or arising from property, shall be enforceable as to the insurance except for the benefit of persons having an insurable interest in the things insured as at the time of the loss.
(b) “Insurable interest,” as used in this section, means any actual, lawful and substantial economic interest in the safety or preservation of the subject of the insurance free from loss, destruction or pecuniary damage or impairment.
(c) The measure of an insurable interest in property is the extent to which the insured might be damnified by loss, injury, or impairment thereof.
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